BUSINESSMAN PLEADS GUILTY IN BANKING CONSPIRACY CASE

FROM:  U.S. DEPARTMENT OF JUSTICE  
Thursday, August 29, 2013
California Businessman Pleads Guilty to Conspiracy to Conceal Israeli Bank Accounts

Encino, Calif., Resident Is the Latest in a Series of Defendants Charged with Conspiring with Bankers to Hide Secret Israeli Bank Accounts
Aaron Cohen of Encino, Calif., pleaded guilty today in the U.S. District Court for the Central District of California to conspiracy to defraud the United States, the Justice Department and Internal Revenue Service-Criminal Investigation (IRS-CI) announced.

According to court documents, Cohen, a U.S. citizen, maintained undeclared bank accounts at two international banks headquartered in Tel Aviv, Israel, identified in court documents as Bank A and Bank B.  One of Cohen’s undeclared accounts was maintained at a branch of Bank A located in the Cayman Islands.  The accounts were held in the names of nominees in order to keep them secret from the U.S. Government.  In or about 2000, Cohen began using the funds in his undeclared account in the Cayman Islands as collateral for back-to-back loans obtained from another branch of Bank A located in Los Angeles.  Cohen’s ownership of the funds in the Cayman Islands accounts was not identified in the loan records maintained at the Los Angeles branch, thus concealing the fact that he was borrowing his own money, paying tax-deductible interest on the loans and not reporting the interest income he was earning in the Cayman Islands on his U.S. tax returns.

 According to the plea agreement, in or about 2009, Cohen transferred approximately $2 million from his Cayman Islands account at Bank A to a new offshore account at Bank B in Israel.  Cohen then used the funds in the new account as collateral to obtain a back-to-back loan from the Los Angeles branch of Bank B. Cohen failed to report any income from the accounts on his individual income tax returns that were filed with the IRS.  For tax years 2006 through 2009, Cohen failed to report interest income of approximately $238,000.  The highest balance in the undeclared accounts was approximately $3,450,000.

“Today’s guilty plea is but the latest example that attempting to hide income and assets from the United States in offshore accounts is a bad gamble,” said Assistant Attorney General for the Justice Department’s Tax Division Kathryn Keneally.  “The Internal Revenue Service will find the hiding places and the Department of Justice will criminally prosecute these tax cheats, who face potential jail time, still owe the taxes due and may lose those hidden assets and more to severe civil penalties."

“Mr. Cohen is yet another taxpayer caught using anonymous offshore accounts to avoid paying his fair share of taxes,” said IRS Criminal Investigation Chief Richard Weber. “Through IRS-CI’s efforts, we are gaining access to more and more information on institutions and individuals involved in offshore tax fraud, and you can expect us to use all of our enforcement tools to fight offshore tax evasion.”

Cohen is the latest in a series of defendants charged in the U.S. District Court for the Central District of California with failing to report income from undeclared accounts in Israel.

On March 29, 2013, Zvi Sperling of Beverly Hills, Calif., pleaded guilty to conspiring to defraud the United States in connection with back-to-back loans obtained in Los Angeles at branches of Bank A and Bank B that were secured by funds in undeclared bank accounts in Israel.  For tax years 2005 through 2008, Sperling failed to report income of approximately $381,563. The highest balance in Sperling’s undeclared accounts was approximately $4 million.

On May 21, 2013, Guity Kashfi of Los Angeles, Calif., pleaded guilty to conspiring to defraud the United States in connection with back-to-back loans obtained from branches of Bank A and Bank B in Los Angeles that were secured by funds in undeclared bank accounts in Israel and Luxembourg.  For tax years 2005 through 2011, Kashfi failed to report interest income of approximately $221,306.  The highest balance in Kashfi’s undeclared accounts was approximately $2.5 million.

U.S. citizens and residents who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III, of their individual income tax returns.  Additionally, U.S. citizens and residents must file a Report of Foreign Bank and Financial Reports (FBAR) with the U.S. Treasury disclosing any financial account in a foreign country with assets in excess of $10,000 in which they have a financial interest, or over which they have signature or other authority.

  Cohen faces a potential maximum prison term of five years and a maximum fine of $250,000.  In addition, Cohen has agreed to pay a civil penalty to the IRS in the amount of 50 percent of the high balance of his undeclared accounts for failing to file FBARs.

Assistant Attorney General Kathryn Keneally of the Justice Department’s Tax Division and André Birotte Jr., U.S. Attorney for the Central District of California thanked special agents of IRS-CI, who investigated the case, and Tax Division Senior Litigation Counsel John E. Sullivan and Assistant Chief Elizabeth C. Hadden, who prosecuted these cases, and Assistant U.S. Attorney Sandra A. Brown of the U.S. Attorney’s Office, who assisted with the prosecutions.